Oct 8, 2020
On Tuesday the Treasurer
released a historic Federal Budget designed to lift the economy out
of the doldrums.
A number of job creation and
wage subsidy measures in the budget should help rapidly reduce our
unemployment rate especially amongst our youngest workers who have
been hit hardest during the pandemic.
After coming within a whisker of
balancing the budget at the end of 2019, the Treasurer revealed the
budget deficit is now projected to blow out to $213.7 billion this
financial year, or 11 percent of GDP, the biggest deficit in 75
years. The figures are eye-watering, but the Government is
determined to do what it takes to keep Australians in jobs and grow
our way out of recession.
While the net debt position of
$1 trillion is a bit of a shock, there is no question that the
government had to do something fiscally significant to kickstart
our economy.
"This is a real restart of the economy. Yes, it will
take 10+ years to pay it back, but with the Government borrowing at
interest rates less than 1% for 10 years,
if there was ever a time to borrow to not just
stimulate the economy,
but create valuable assets, then now is the
time.”
Touted as one of the most
significant Federal Budgets since the Great Depression, and the
first since the economic devastation sparked by the COVID-19
pandemic, Treasurer Josh Frydenberg said the next phase of the
journey is to secure Australia’s future.
The 2020 Federal Budget includes
hundreds of billions of dollars of economic stimulus measures, the
likes of which we’ve never seen before.
Key highlights at a
glance
Taxes
- More
than 11 million Australians will receive tax cuts with a permanent
cut of $47 a week for high-income earners.
- Middle-income earners will also receive a
one-off $21 with extension of the low and middle-income tax offset
into 2020-21.
- From
2020-21, the upper limit of the 19% personal income tax bracket
will rise to $45,000 and the 32.5% marginal tax rate upper
threshold will lift from $90,000 to $120,000.
Jobs
- The
Morrison government will pay businesses up to $200 per week to hire
young Australians as part of a $4bn budget measure that aims to
reverse an increase in youth unemployment during the
recession.
- The
new incentive will target firms that employ young workers who had
previously been receiving Jobseeker.
- It
follows Sunday’s announcement of expanded training subsidies, with
the government pledging to cover half the wages of 100,000 new
apprenticeships and traineeships.
Welfare
- The
government has announced two additional economic support payments
of $250 to pensioners and other eligible recipients, worth
$2.6bn.
- Extension of the jobkeeper payment support for
a further six months until 28 March 2021.
- Extension of the coronavirus supplement until
31 December 2020 at a rate of $250 per fortnight from 25 September
2020.
- The
budget doesn’t provide any clarity about the future of Jobseeker
payment rates after Christmas.
Education
- $1bn
will be injected into Australia’s university research
sector.
- Funding for 50,000 online short courses to
upskill workers and unemployed Australians in teaching, health,
science, information technology and agriculture.
- $299m
to provide an additional 12,000 undergraduate university places in
2021.
Small business
- Businesses with a turnover of less than $5bn –
all but the top 1% – will be able to deduct the full cost of
capital assets purchased after budget night and first used or
installed by 30 June 2022.
- Small
and medium businesses will also be able to apply “full expensing”
to second-hand assets; businesses earning $50m to $500m will be
able to do so for assets of less than $150,000.
- Companies with turnover up to $5bn will be able
to offset losses against previous profits on which tax has been
paid, to generate a refund.
- Exempting from the 47% fringe benefits tax
employer-provided retraining activities to employees who are
redeployed to a different role in the business.
- $4.5bn investment in NBN Co and $29.2m to
accelerate the rollout of the 5G network.
Health
- 23,000 new packages for older Australians
waiting to receive at home care, at a cost of $1.6bn.
- $2.3bn in announced funding for investment in
Covid-19 treatments and vaccines and funding for the listing of new
drugs on the pharmaceutical benefits scheme, including Lynparza for
women diagnosed with ovarian cancer.
- $750m
in funding for Covid-19 testing and $171m for the extended
operation of up to 150 dedicated respiratory clinics to manage and
diagnose Covid-19 cases.
- $798.8m for the National Disability Insurance
Agency and NDIS Quality and Safeguards Commission.
- A
targeted capital gains tax exemption for granny flat arrangements
where there is a formal written agreement, applying to arrangements
with older Australians or those with a disability.
Environment
- The
Morrison government’s environment and energy budgets consist
largely of pre-announced items, including funding for its
technology roadmap for reducing Australia’s emissions and $52m for
the expansion of Australia’s gas industry.
- Tuesday’s budget reiterated the government’s
plan to fund the Australian Renewable Energy Agency (Arena) for a
further 10 years from 2022 to a total of $1.4bn. Over the next four
years, the agency will receive $223.9m.
- The
government is spending $50m on carbon capture and storage to fund
pilot projects it claims will “dramatically cut” emissions from
industrial facilities and there is $70.4m over five years for a
regional hydrogen export hub.
- The
environment minister, Sussan Ley, said the government would spend
$67.4m on oceans and marine ecosystems.
- Earlier this year the government announced $25m
to reduce the timeframes for approvals for major projects. Tuesday
night’s budget adds an extra $12m in funding over the next two
years.
- There
is $52.9m for investments in gas – announced in September –
including $10.9m for planning of gas infrastructure.
- The
government will spend $249.6m over four years on waste and
recycling policies, including $190m for a recycling modernisation
fund for new infrastructure to sort plastic, paper, tyres and glass
waste and $233.4m to upgrade facilities at national
parks.
Infrastructure
- $14bn
in new and accelerated infrastructure projects over the next four
years in every state and territory, including Melbourne to Brisbane
inland rail and Western Sydney international (Nancy-Bird Walton)
airport
- $3bn
towards shovel-ready projects to support further job creation and
economic recovery, including for small scale road safety
projects.
Housing
- An
additional 10,000 places in first home loan deposit scheme in
2020-21 to support the purchase of a new home or a newly built
home.
Super
- Australians will automatically keep their
superannuation fund when they change employers, stopping the
creation of unintended multiple accounts.
- A new
online YourSuper comparison tool will help people compare the
performance of funds which will be required to meet an annual
performance test.
Source:
The
Guardian
I believe the budget will be a
metaphorical rocket fuel for property prices across Australia. The
pandemic has upended the rule book when it comes to economic
management and this budget was destined to be an outlier compared
to any other in living memory.
What’s happening in the market
right now?
Prior to the announcement,
property markets were holding up much better than a lot of property
experts thought they would, predicting a 30-50% drop, whereas the
majority of markets didn’t get to double digits (apart from VIC and
WA).
Dwelling values were steady in
numerous locations, apart from Melbourne, with the low volume of
stock creating strong competition amongst buyers.
In the markets we certainly
aren’t seeing any bargain prices – and that state of affairs will
not change in the months ahead. That’s because one of the early
indicators of future property price growth is when there is an
undersupply of rental properties, which starts to force rents
upwards.
I am encouraging my members to
buy now before the upcoming property boom.
In the parts of the country that
we’re buying in for our members, we’re competing with homebuyers
and savvy investors for the best opportunities. Our members have
been steadily growing their wealth, thanks to our tried and tested
Markoski Method™.
These are uncertain times and
with the budget ‘rocket fuel’ now underway, it’s hard to determine
how long the opportunity to take advantage of the upcoming boom
will last.
How will the budget impact
property prices?
This budget indicates that the
Government wants our economy to rebound as quickly as possible and
is obviously prepared to spend whatever is necessary to make that
happen.
When it comes to the impact on
property prices, I believe the budget measures will supercharge the
next round of growth. Although property prices never really
contracted by much, I’m confident that we’re going to see a sharp
recovery.
If you want to hear more on my
thoughts about the impact of the budget listen to my podcast
series
The Positive Property
Show
At the end of the day as long as
you have a sound investment strategy, thinking of the long term,
you’re going to be safe no matter what the markets are doing. I
haven’t got a crystal ball, neither does anyone else, and there may
be a short little dip, however the prospects of long term property
investing looks awesome regardless.
Educate yourself so you can take advantage of the
upcoming boom. Join like
minded investors who are wanting to live life on their own terms in
our free Positive Property Group